—— U.S. Municipal Bond Defaults May Rise; BBBY Tries $1B Financing to Avoid Bankruptcy; Super Bowl Bets May Top $16B; SoftBank Loses $5.5B as Son Disappears; BP Reports Record Profit; Carlyle CEO Exit Hurts Fundraising; Truist Lays Off 5% of Bankers
1. U.S. Municipal Bond Defaults May Rise
Strategists at Bank of America expect defaults in the $4 trillion municipal bond market to worsen this year.
According to a report published last Friday, BofA estimates $1.7 to $2.1 billion in muni-bond defaults in 2023. In January, newly defaulted bonds totaled $611 million, a 122% year-on-year increase, making it the third-highest month since 2019. Most of the defaults stemmed from unrated, non-profit care centers and hospital projects.
In recent years, low interest rates and government funding helped many municipal projects stay afloat. But with worsening economic conditions and declining government support, many of these projects may not last much longer.
Nevertheless, investors appear undeterred—high-yield municipal bonds have returned 4.6% so far this year, outperforming the broader market by 2%.
Last month, the non-profit Alabama Gulf Coast Zoo failed to repay principal on its debt—just one of many similar cases.
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2. BBBY Tries $1B Financing to Avoid Bankruptcy
According to sources, former home goods retail giant Bed Bath & Beyond Inc. (BBBY) announced today it plans to issue convertible preferred shares and warrants to raise at least $1 billion in a last-ditch effort to avoid bankruptcy.
The company has already attracted interest from multiple institutional investors, one of whom reportedly agreed to buy a significant portion of the new shares, though their identity remains undisclosed.
The convertible preferred shares could immediately generate $225 million in funding, allowing BBBY to avoid defaulting on an asset-backed loan and repay overdue bond obligations. The company also plans to gradually issue warrants to secure the remaining $800 million in future funding.
Joel Bines, Global Retail Head at consulting firm AlixPartners, said the financing merely buys BBBY more time and does not address the company’s underlying business problems.
The share issuance can help BBBY repay debt but will not resolve its core operational challenges.
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3. Super Bowl Bets May Top $16B
Sports betting has become increasingly popular in the U.S. in recent years. Industry projections estimate that this Sunday’s NFL Super Bowl could attract $16 billion in wagers.
The American Gaming Association predicts that 30 million Americans will bet on Sunday’s game between the Philadelphia Eagles and the Kansas City Chiefs, up from 18.2 million last year.
Total wagers for last year’s Super Bowl reached $7.6 billion. This year, 50.2 million Americans are expected to place bets directly or indirectly through friends, more than double last year’s total.
The NFL Super Bowl consistently ranks as the most-watched sporting event in the U.S. Each year, sports betting platforms like FanDuel and DraftKings earn massive revenue from the event.
The Super Bowl is the most-watched U.S. sporting event, with tens of millions betting on it annually.
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4. SoftBank Loses $5.5B as Masayoshi Son Disappears From Spotlight
SoftBank founder Masayoshi Son has recently disappeared from the public eye and skipped his company’s traditional annual investor address.
According to SoftBank’s financial results for October–December, the company lost $5.5 billion. CFOs emphasized that the balance sheet and investment portfolio remain healthy and resilient, urging investors not to worry.
Navneet Govil, CFO of the Vision Fund, said the labor market remains uncertain and that future economic conditions and corporate earnings remain unclear. The fund will maintain a defensive stance.
Govil also said China’s tech sector and broader market have notably improved, and U.S. sanctions on Chinese chipmakers have had limited impact on the Vision Fund.
Son usually hosts the investor meeting personally, but following massive losses in recent years, he appears to have stepped back.
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5. BP Reports Record Profit in 114-Year History
Oil giant BP reported $27.7 billion in net profit for 2022, more than double the $12.8 billion it earned in 2021. This surpasses its 2008 record of $26.3 billion and marks the highest profit in the company’s 114-year history.
Three years ago, CEO Bernard Looney pledged to reduce oil and gas production by 40% by 2030 to cut carbon emissions. However, the company recently revised that goal to a 25% reduction, citing concerns that the initial target was too aggressive.
Although BP’s stock outperformed the broader market last year, its return on equity was lower than that of other major European oil companies.
BP aims to gradually cut oil and gas output and transition toward a cleaner, renewable energy future.
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6. Carlyle CEO Exit Hurts Fundraising
Last summer, former CEO Kewsong Lee abruptly resigned, and the Carlyle Group spent six months without a permanent replacement. The leadership vacuum severely disrupted fundraising efforts.
On Monday, Carlyle appointed former Goldman Sachs CFO Harvey Schwartz as its new CEO.
In the most recent quarter, Carlyle raised just $4.9 billion—well below its past performance and far behind Blackstone’s $43 billion in the same period.
Carlyle, which manages $400 billion in assets, raised just $600 million for its new flagship buyout fund. Although the entire private equity sector faces headwinds, peers like KKR and Apollo have outperformed Carlyle in fundraising.
Investors were concerned about Carlyle’s leadership stability and macroeconomic uncertainty, both of which dragged down fundraising.
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7. Truist Lays Off 5% of Investment Bankers
Sources revealed that Truist Financial Corp. recently laid off about 5% of its investment banking division, citing a slowdown in IPO and M&A activity.
At the end of January, Truist cut positions across all levels of its investment bank, affecting dozens of bankers.
A Truist spokesperson said the company would continue to adjust staffing based on conditions, with some departments still hiring while underperforming areas see layoffs.
CFO Mike Maguire said during last month’s earnings call that Truist’s investment banking revenue fell 37% last year, outperforming the sector due to timely personnel adjustments.
As of the end of 2021, Truist had over 50,000 full-time employees. Laid-off bankers will receive severance and be considered for other roles.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.